Blackstone and Starwood Acquire Extended Stay America
The Largest Hotel Sale Since the Pandemic Began
Blackstone Group (BX) and Starwood Capital Group are buying the hotel company Extended Stay America (STAY) for $6 billion. This is the largest sale in the hotel industry since the COVID-19 pandemic began.
Analysts expect that hotels’ revenue will not return to pre-pandemic levels for two to three years, but Extended Stay has outperformed the rest of the industry during the pandemic. Blackstone and Starwood have high hopes that the chain will continue to perform well in the near future.
Extended Stay Outperforms Hotel Industry Peers
Demand for leisure and business travel has tumbled during the pandemic. US hotel occupancy was about 65% just before the pandemic. In mid-April it fell to 22%. On average, it was about 44% during 2020. Extended Stay was able to maintain an occupancy rate of 74%.
Extended Stay is a hotel chain for guests booking for several weeks or longer. Its rooms are larger than a typical hotel room and most of them have kitchens. During the pandemic, healthcare workers and other essential workers needing to work away from home turned to Extended Stay.
Expectations for a Bright Future
Extended Stay owns 567 properties and it franchises an additional 82. About two thirds of its locations are in the top 25 US metro areas.
Blackstone and Starwood expect that as the economy begins to reopen, construction workers, contractors, consultants, and other professionals will embark on long-term business travel to these areas. If this is the case, Extended Stay’s occupancy and balance sheets will stay strong.
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